Qurate Retail(QRTEA) - 2025 Q1 - Quarterly Results

Executive Summary & Q1 2025 Headlines QVC Group's Q1 2025 performance reflects a challenging market, with strategic focus on social shopping and overall revenue decline CEO Commentary & Strategic Focus CEO David Rawlinson highlighted a challenging market backdrop due to declining linear TV viewership and tariff volatility impacting discretionary retail, with a strategic focus on social shopping - Challenging market backdrop due to declining linear television viewership and tariff volatility impacting consumer sentiment in discretionary retail[2] - Strategic focus on social shopping as a transformative opportunity, with a first-of-its-kind 24/7 content creation partnership with TikTok for 24/7 content creation[2] Q1 2025 Key Financial Headlines QVC Group reported a 10% revenue decrease, generated an operating income of $14 million, and saw Adjusted OIBDA decrease by 32%, with all segments experiencing revenue declines Q1 2025 Key Financial Headlines | Metric | Value (US Dollars) | Change (YoY) | | :----------------------- | :----------------- | :----------- | | QVC Group Revenue | N/A | -10% | | Operating Income | $14 million | N/A | | Adjusted OIBDA | N/A | -32% | | QxH Revenue | N/A | -11% | | QVC International Revenue | N/A | -6% | | Cornerstone Revenue | N/A | -13% | Discussion of Results QVC Group experienced a significant decline in consolidated revenue, operating income, and Adjusted OIBDA, with all segments reporting decreased performance QVC Group Consolidated Performance Total QVC Group revenue decreased 10% to $2,105 million, and operating income plummeted 90% to $14 million, reflecting broad challenges across segments QVC Group Consolidated Financial Performance (1Q25 vs. 1Q24) | Metric | 1Q24 (millions) | 1Q25 (millions) | % Change | % Change Constant Currency | | :-------------------------- | :-------------- | :-------------- | :------- | :----------------------- | | Total QVC Group Revenue | $2,342 | $2,105 | (10)% | (10)% | | Total QVC Group Operating Income (Loss) | $145 | $14 | (90)% | (89)% | | Total QVC Group Adjusted OIBDA | $259 | $177 | (32)% | (31)% | QxH Segment Performance QxH revenue declined 11% due to decreased units shipped and average selling price, with operating income significantly impacted by a $36 million restructuring charge - QxH revenue declined 11% primarily due to a 10% decrease in units shipped and a 2% decline in average selling price, along with lower shipping and handling revenue[7] - Operating income was impacted by a $36 million restructuring charge related to a reorganization plan, which was excluded from Adjusted OIBDA[6][8] QxH Segment Financial Performance (1Q25 vs. 1Q24) | Metric | 1Q24 | 1Q25 | % Change | | :-------------------------- | :----- | :----- | :------- | | Revenue | $1,539 | $1,368 | (11)% | | Operating Income (Loss) | $94 | $0 | NM | | Adjusted OIBDA | $185 | $122 | (34)% | | Operating Income Margin (%) | 6.1% | 0.0% | (610)bps | | Adjusted OIBDA Margin (%) | 12.0% | 8.9% | (310)bps | QVC International Segment Performance QVC International's revenue decreased 6% (4% in constant currency) due to lower units shipped and average selling price, with operating income affected by a $21 million restructuring charge - Constant currency revenue declined due to a 4% decrease in units shipped and a 1% decrease in average selling price, with declines across home, beauty, and apparel, partially offset by growth in jewelry and electronics[10] - Operating income decreased mainly due to a $21 million restructuring charge related to a reorganization announced in March, which was excluded from Adjusted OIBDA[6][11] QVC International Segment Financial Performance (1Q25 vs. 1Q24) | Metric | 1Q24 | 1Q25 | % Change | % Change Constant Currency | | :-------------------------- | :----- | :----- | :------- | :----------------------- | | Revenue | $572 | $537 | (6)% | (4)% | | Operating Income (Loss) | $63 | $29 | (54)% | (51)% | | Adjusted OIBDA | $75 | $63 | (16)% | (13)% | | Operating Income Margin (%) | 11.0% | 5.4% | (560)bps | N/A | | Adjusted OIBDA Margin (%) | 13.1% | 11.7% | (140)bps | N/A | Cornerstone Segment Performance Cornerstone revenue decreased 13% due to softness in home and apparel sectors, with both operating income and Adjusted OIBDA margins declining from sales deleverage and higher administrative costs - Revenue decreased due to continued softness in interior furniture, outdoor furniture, and decor in the home sector and for apparel at Garnet Hill[12] - Operating income and Adjusted OIBDA margin decreased primarily due to sales deleverage and higher administrative costs related to the previously announced transformation plan, partially offset by lower fulfillment and supply chain costs[13] Cornerstone Segment Financial Performance (1Q25 vs. 1Q24) | Metric | 1Q24 | 1Q25 | % Change | | :-------------------------- | :----- | :----- | :------- | | Revenue | $231 | $200 | (13)% | | Operating Income (Loss) | $(3) | $(11) | (267)% | | Adjusted OIBDA | $6 | $(4) | NM | | Operating Income Margin (%) | (1.3)% | (5.5)% | (420)bps | | Adjusted OIBDA Margin (%) | 2.6% | (2.0)% | NM | Supplemental Metrics Supplemental metrics reveal segment-specific trends in cost of goods sold, eCommerce penetration, mobile adoption, and total customer counts for QxH, QVC International, and Cornerstone QxH Supplemental Metrics QxH saw its Cost of Goods Sold as a percentage of revenue increase by 210 bps to 67.5%, while eCommerce revenue decreased 9% but its share of total revenue increased to 63.4% QxH Supplemental Metrics (1Q25 vs. 1Q24) | Metric | 1Q24 | 1Q25 | Change | | :-------------------------- | :----- | :----- | :------- | | Cost of Goods Sold % of Revenue | 65.4% | 67.5% | 210 bps | | eCommerce Revenue | $958 | $867 | (9)% | | eCommerce % of Total Revenue | 62.2% | 63.4% | 120 bps | | Mobile % of eCommerce Revenue | 69.8% | 71.3% | 150 bps | | LTM Total Customers | 8.0 | 7.4 | (8)% | QVC International Supplemental Metrics QVC International's Cost of Goods Sold as a percentage of revenue increased by 80 bps to 64.8%, with eCommerce revenue decreasing 4% but its share of total revenue increasing to 52.7% QVC International Supplemental Metrics (1Q25 vs. 1Q24) | Metric | 1Q24 | 1Q25 | Change | % Change Constant Currency | | :-------------------------- | :----- | :----- | :------- | :----------------------- | | Cost of Goods Sold % of Revenue | 64.0% | 64.8% | 80 bps | N/A | | eCommerce Revenue | $294 | $283 | (4)% | (1)% | | eCommerce % of Total Revenue | 51.4% | 52.7% | 130 bps | N/A | | Mobile % of eCommerce Revenue | 68.8% | 76.7% | 790 bps | N/A | | LTM Total Customers | 4.1 | 4.0 | (2)% | N/A | Cornerstone Supplemental Metrics Cornerstone's Cost of Goods Sold as a percentage of revenue decreased by 220 bps to 57.5%, while eCommerce revenue decreased 14% and its share of total revenue slightly declined to 75.0% Cornerstone Supplemental Metrics (1Q25 vs. 1Q24) | Metric | 1Q24 | 1Q25 | Change | | :-------------------------- | :----- | :----- | :------- | | Cost of Goods Sold % of Revenue | 59.7% | 57.5% | (220)bps | | eCommerce Revenue | $175 | $150 | (14)% | | eCommerce % of Total Revenue | 75.8% | 75.0% | (80)bps | Cash and Debt QVC Group experienced a decrease in cash and an increase in total debt, with specific details on bank credit facility utilization and leverage ratios Cash and Debt Overview QVC Group's cash and cash equivalents decreased by $72 million to $833 million, while total debt increased by $69 million to $5,566 million, primarily due to additional borrowings for debt repayment - Cash at QVC Group decreased $72 million in the first quarter due to cash used in operations, capital expenditures, and expenditures for television distribution rights, partially offset by increased borrowings[23] - Total debt at QVC Group increased $69 million in the first quarter primarily due to additional borrowing under QVC's bank credit facility, a portion of which funded the repayment of the remaining $585 million of QVC, Inc.'s 4.45% Senior Notes due in February 2025[23] Cash and Debt (amounts in millions) | Metric | 12/31/2024 | 3/31/2025 | | :-------------------------- | :--------- | :---------- | | Cash and cash equivalents (GAAP) | $905 | $833 | | Total QVC Group Debt | $5,497 | $5,566 | | Total QVC Group Debt (GAAP) | $4,968 | $5,000 | Debt Covenants and Leverage QVC's bank credit facility had $1.85 billion drawn with $863 million incremental availability, and while the consolidated leverage ratio exceeded 3.5x, QVC Group remains in compliance with all debt covenants - QVC's bank credit facility has $1.85 billion drawn as of March 31, 2025, with incremental availability of $863 million, net of letters of credit[25] - On April 1, 2025, Cornerstone was removed as a borrower under QVC's credit agreement and will not be included in future calculations of QVC, Inc.'s leverage[25] - QVC, Inc.'s leverage ratio, as defined by the QVC revolving credit facility and adjusted for the removal of Cornerstone, was 3.7x at quarter-end. QVC's consolidated leverage ratio was greater than 3.5x, restricting unlimited dividends, but QVC Group is in compliance with all debt covenants[25][26][27] Non-GAAP Financial Measures This section provides definitions and rationale for QVC Group's non-GAAP financial measures, specifically Adjusted OIBDA and constant currency metrics Definition of Adjusted OIBDA Adjusted OIBDA is defined as operating income (loss) plus depreciation, amortization, stock-based compensation, and other specific non-recurring items, used to assess operational strength and performance - Adjusted OIBDA is defined as operating income (loss) plus depreciation and amortization, stock-based compensation, and where applicable, separately identified impairments, litigation settlements, restructuring, acquisition-related costs, and (gains) losses on sale leaseback transactions[32] - QVC Group believes Adjusted OIBDA is an important indicator of the operational strength and performance of its businesses, allowing management to view operating results and perform analytical comparisons and benchmarking[33] Definition of Constant Currency Constant currency financial metrics are non-GAAP measures calculated by translating current and prior-year amounts using a single foreign exchange rate to assess business performance excluding currency fluctuations - Constant currency financial metrics are calculated by translating the current-year and prior-year reported amounts into comparable amounts using a single foreign exchange rate for each currency[34] - QVC Group uses constant currency financial metrics to provide a framework to assess how its businesses performed excluding the effects of foreign currency exchange fluctuations, especially for its subsidiaries in the UK, Germany, Italy, and Japan[35] Financial Reconciliations This section presents detailed reconciliations of QVC Group's consolidated and subsidiary operating income to Adjusted OIBDA for the first quarter Consolidated Operating Income and Adjusted OIBDA Reconciliation The reconciliation shows QVC Group's 1Q25 operating income of $14 million, adjusted by adding back $102 million in depreciation and amortization, $4 million in stock compensation, and $57 million in restructuring costs, to arrive at an Adjusted OIBDA of $177 million QVC Group Consolidated Operating Income and Adjusted OIBDA Reconciliation (amounts in millions) | (amounts in millions) | 1Q24 | 1Q25 | | :---------------------------------- | :----- | :----- | | QVC Group Operating Income (Loss) | $145 | $14 | | Depreciation and amortization | $99 | $102 | | Stock compensation expense | $16 | $4 | | Restructuring costs | — | $57 | | Gain on sale leaseback transaction | (1) | — | | QVC Group Adjusted OIBDA | $259 | $177 | Subsidiary Adjusted OIBDA Reconciliation This section provides detailed reconciliations for QVC and Cornerstone, showing QVC's 1Q25 operating income of $29 million reconciled to an Adjusted OIBDA of $185 million, and Cornerstone's operating loss of $11 million to an Adjusted OIBDA loss of $4 million Subsidiary Adjusted OIBDA Reconciliation (amounts in millions) | (amounts in millions) | 1Q24 | 1Q25 | | :-------------------------- | :----- | :----- | | QVC | | | | Operating income (loss) | $157 | $29 | | Depreciation and amortization | $92 | $95 | | Stock compensation | $12 | $4 | | Restructuring costs | — | $57 | | Adjusted OIBDA | $260 | $185 | | Cornerstone | | | | Operating income (loss) | $(3) | $(11) | | Depreciation and amortization | $7 | $7 | | Stock compensation | $2 | — | | Adjusted OIBDA | $6 | $(4) | Condensed Consolidated Financial Statements This section provides the condensed consolidated balance sheet, statement of operations, and statement of cash flows for QVC Group as of and for the three months ended March 31, 2025 Condensed Consolidated Balance Sheet Information As of March 31, 2025, total assets were $8,981 million, down from $9,243 million, while total liabilities decreased to $9,874 million from $10,128 million, primarily due to a reduction in current portion of debt Condensed Consolidated Balance Sheet (amounts in millions) | Metric | March 31, 2025 | December 31, 2024 | | :---------------------------------- | :--------------- | :---------------- | | Total assets | $8,981 | $9,243 | | Total liabilities | $9,874 | $10,128 | | Cash and cash equivalents | $833 | $905 | | Current portion of debt | $242 | $867 | | Long-term debt | $4,758 | $4,101 | Condensed Consolidated Statement of Operations Information For the three months ended March 31, 2025, QVC Group reported a net loss of $91 million, a significant decline from prior year net earnings, with total revenue decreasing to $2,105 million and operating income falling to $14 million Condensed Consolidated Statement of Operations (amounts in millions) | Metric | 3 Months Ended March 31, 2025 | 3 Months Ended March 31, 2024 | | :---------------------------------- | :---------------------------- | :---------------------------- | | Total revenue, net | $2,105 | $2,342 | | Operating income (loss) | $14 | $145 | | Restructuring costs | $57 | — | | Net earnings (loss) | $(91) | $8 | | Net earnings (loss) attributable to QVC Group, Inc. shareholders | $(100) | $(1) | Condensed Consolidated Statement of Cash Flows Information For the three months ended March 31, 2025, net cash used in operating activities was $60 million, net cash used in investing activities increased to $78 million, and net cash provided by financing activities was $55 million Condensed Consolidated Statement of Cash Flows (amounts in millions) | Metric | 3 Months Ended March 31, 2025 | 3 Months Ended March 31, 2024 | | :---------------------------------- | :---------------------------- | :---------------------------- | | Net cash provided (used) by operating activities | $(60) | $26 | | Net cash provided (used) by investing activities | $(78) | $(31) | | Net cash provided (used) by financing activities | $55 | $(2) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(71) | $(19) | | Cash, cash equivalents and restricted cash at end period | $852 | $1,117 | Important Notice & Forward-Looking Statements This section provides conference call access details and a disclaimer regarding forward-looking statements, outlining various risks and uncertainties that could impact future results Important Notice & Forward-Looking Statements Details This section details access to the Q1 2025 earnings conference call and includes a standard disclaimer regarding forward-looking statements, highlighting various risks and uncertainties - Details for accessing the Q1 2025 earnings conference call on May 7, 2025, at 5:00 p.m. (E.T.) are provided, including dial-in numbers and webcast information[28] - The press release includes forward-looking statements subject to many risks and uncertainties, such as changes in market acceptance, competitive issues, regulatory matters, continued access to capital, changes in law, general market conditions (including tariff volatility), and issues impacting the global supply chain and labor market[29] - QVC Group expressly disclaims any obligation to disseminate updates or revisions to any forward-looking statement and refers readers to its publicly filed Forms 10-K and 10-Q for additional risk information[29]